Cities and PPPs: I’ve got Ulaanbaatar on my mind

I recently read a quote by Edward Glaeser, an urban economist, in the latest issue of IFC’s quarterly journal on Public-Private Partnerships (PPPs), which caught my attention:

Statistically, there is a near-perfect correlation between urbanization and prosperity among nations. As a country’s urban population rises by 10 percent, the country’s per capita output increases by 30 percent.

I immediately thought of Ulaanbaatar, the frozen capital of Mongolia, which The Economist recently described as a boom town. Since the emergence of the free-market economy twenty years ago, the population of the city has doubled to over one million. Economic growth in Mongolia has certainly been phenomenal—20.8 percent in the third quarter of 2011—led by a mining sector gone wild. I’m not sure if Mongolia’s experience was factored in Glaeser’s calculations, but the correlation seems to hold.

Prosperity, however, hasn’t come just yet. The surge in the population of UB (as we call the capital) put a visible strain on the city. You don’t have to be an economist to see it. The roads can’t handle the 100,000+ vehicles in the city today, which has led to horrendous traffic jams. Three Soviet-era coal-fired power plants contribute to the sickening winter smog. Hundreds of thousands of people in the newly-created ger districts have limited access to housing, electricity, or water. Health systems are overburdened, and educational institutions struggle to prepare young people for the new economy.

So what’s the answer? To stop the urban migration? Definitely not. As Glaeser points out: “People are moving for a reason. It’s a terrible thing there are so many poor people in the world, but it’s not a terrible thing that they have come to cities to try and make their lives better.” Instead, Ulaanbaatar will have to evolve as its population and economy grow. To do that, it will need the experience and resources of the private sector.

Public-private partnerships can help make that happen. Mongolia has already taken the initial steps. With help from the Asian Development Bank (ADB), it passed the Law on Concessions in 2010 and kicked off its first major PPP, for a new power and heating plant. And good governance, especially in relation to the development of the mining sector, is a high priority and a core part of the government’s partnership agreement with the World Bank. With a better regulatory environment for PPPs, the private sector will be able to contribute a lot to the city’s infrastructure and public services.

But there’s a lot more to be done before Ulaanbaatar can be considered a world-class city that meets the needs of its people and supports the country’s expanding economic machinery. Is it going to happen? Having watched Mongolia for the last several years, I’m optimistic. But it would be great to hear what people living in Ulaanbaatar (Mongolians and expats alike) think about the future of the city.

It is very interesting subject to talk about Ulaanbaatar. I am Mongolian, I believe we have brighter future but have work very hard.
We have a lot to offer to the rest of the world but how can we delever all of it, having no education is not easy. The governmnet itself have no experience and no knowledge about economy or development.
we dont have population for labour, rest of the world sees us income for mining company.
If government spent enough money to keep countryside people confortable this is only way to reduce city pollution. Herders have very hard life to battle with harsh weather day and night summer and winter.
instead of given money to people after moved into ger district in city, country should encourage people work as used to be, build a house for them, drill well for them in countryside, connect roads within soums, reduce thier expenses on nomads life, make it civilized.
If the government spend more money for countryside people for schooling, hospital, education of course everybody would love to live there.

Sara - You make some excellent points about urbanization. I hope to see more growth outside of Ulaanbaatar, including Erdenet, Darkhan and soum centers. I hope that some of the income from mining will be used for development in the countryside. Fortunately, Mongolia is a democracy, and politicians will have to listen to the voters. -David

Well, I will say it is probably not good social science to assert causal relationship so categorically. The introductory quote from Edward Glaeser triggering this post is thus problematic. Urbanisation has a potentially positive impact on prosperity and that prosperity is most certainly guaranteed for certain segments of the urban population, but is it for all ? It appears large majority of new urban settlers end up in slums and shanty towns where it is really hard to see how their new life is better in material terms from the rural one they left. Yet a complex feel better factor also come to play generally, that is, despite their material poverty, new urban dwellers may still entertain a "modernity complex" which make them feel better than their erstwhile fellow rural dwellers.
In short the potential of urbanisation to spur prosperity is there. But it is not an automatic relationship, it is just a potential that can or can't be realised depending on a complex sets of factors ranging from urban dwellers self-dynamism to good policy implementation by local and central governments.
What is sure is that the 1960-70 perception of urbanisation a a calamity is not outdated. In fact could it be that The age of nations is over, the new urban age has begun (http://bit.ly/x2gnSg) ? And wither Africa in 50 years in the light of fast urbanisation: http://ledna.org/links/africa-50-years%E2%80%99-time-road-towards-inclusive-growth ?

Serge- Thanks for your comment. You touch on important issues. It is true that the people living in ger districts do not have easy lives. However, in spite of the hardships, they keep coming. The reasons may vary, but every new city dweller I spoke with said they came for opportunity - if not for themselves, for their children. The relationship between urbanization and prosperity may not be automatic, and certainly isn't even. I suspect that it will continue in Mongolia. - David

Regarding the smoke in the photo - it does look worse than what you usually see coming out of a power plant in Ulaanbaatar. I was tempted to use a photo of the city blanketed in pollution, but it just looked like fog. This photo comes from the blog of an air pollution scientist (see caption) as was taken several years ago. There are more very good pictures of air pollution in UB here: http://cires.colorado.edu/blogs/mongolia/2012/01/31/your-ub-air-pollution-photos/ - David

I've spent 12 years living and studying in the US. Now I come to the conclusion that I should go back to Mongolia and contribute to its development through what I have learned in American schools. However, I am anxious about going back. One of the major fears that I have about going back is that there is a system in Mongolia that does not value academic and professional merit but promotes the power of connections and "buying" job posts. What would you advise to those like me who are contemplating a return to our homeland and pursue professional careers there? Thank you.

Hi Erdene,
I do understand your struggling between two countries USA & Mongolia really good.I did return to UB 6 months ago after studying and working in numerous European countries e.g Germany, France and United Kingdom ( 8 years)..Mongolia demonstrates a development in few areas indeed.Although,here i can talk only from my point of view, this development does not seems to occur in working environment. An outstanding academic is indeed highliy demanded in every sectors ,but the question is are you wiling to work with ''slackers''. In this relative short amount of time, i have had a job in state financial institution as well as in Growth generating sector (Mining). In State financial institution where i worked for, there is tremendous amount of Vitamin B/Beziehung (Vitamin-Connection) employees. Which could be a real disappointment to a real academics. In private sector most of my co-workers are post-state employees or non-urban citizens with very poor education and work attidude.
In matter of fact, there are many of graduates/ (with or no international work experience) are returning to Mongolia, but i personally believe an general education such as International Business or whatever are not demanded.
If i were you, i would not return to UB within next 5 years, since Mongolia as a Lower middle income Country (according to IFC) with corruption index above acceptable level, is after all not an option for career enhancement.
Cheers,
Anonymous

Dear Friend,
It is sorry to hear that you do not wish to return home. But I would really recommend to reconsider. The country is growing rapidly and I think there is a way for you. There is a saying "Dont judge the country judge the people". One person can make a difference, development comes from one person. I mean that if people see what someone is doing others can follow. As for myself I have spent 15 years abroad, states and Europe. Now I have returned home to put my education to work (engineering, BSc, and business, MSc). I cant say that I dont face difficulties but I try to manage everything as I have learnt abroad. We Mongolians can adapt to any situation, so I say returning has been my best choice since crisis effected Europe and US. Here you can donate your knowledge to the development of the nation, there are people and organizations that value education and will.

Erdene, I think it's excellent that you would like to use your skills in Mongolia. While I understand your apprehension, I think it's worth exploring career opportunities there. The economy is growing rapidly, and the private sector—both Mongolian and foreign firms—need people like you. Their priority is to get the best people available, so the issues you raised are much less of an issue.

Well, to all mongolians, i will definitely recommend to come back and make changes. I, myself studied abroad not that long (6 years BS+Ms) comparing to you guys. and between my studies i have worked in UB for 1,5 year which was a great experience. I know a lot of my friends are feared to come back cuz of the difficulties, but what i am saying is that.. its changing. specially the private sector, they know how to encourage the ones who has the skills. but its not the case in public sector yet, like government organizations or etc. If you wanna work in government agencies you have to have the skill + some connections. The point is that, foreign educated mongolians should all come back to mongolia and start making the changes together. I guess, although many ppl r coming back, they r still not powerful enough to break the old system. So I always tell my friend to go back and work for your parents and kids. and one more thing is that, i want all mongolians to use their brain for 100% domestic companies. otherwise in a result of your hard work, some person, not mongolian, will have money for their bread. I think, everyone, not only mongolians, will feel the same way, specially if he/she is from 'small' country.

As far as I can see from blogs conversation I would like tell you that it is time for our generation. We have to make changes for Mongolian people. I spent 5 years in UK to study now I am happily working in Mongolia since Oct 2011. I am looking forward to see all Mongolians returned to contribute for Mongolia. Do you ever realise that why did you go abroad for studying? You should think about it
Your family wanted you to learn culture, education to establish our country NOT live in good life by yourself.
Your country wanted you to learn education system as well as experience in field to bring the knowledge NOT spend your whole life in abroad.
Please don't judge me what I wrote.

Right, Enkhee, I totally agree with u!
I am really glad that someone came back and working happily in his/her home country. I know a lot of ppl coming back, but then again.. there are lot of others who stays abroad and never even considering coming back. You will make the changes for you, not the others!

Dear Enkhee and Amaraa - Great comments. I wonder if you've noticed what skills employers in Mongolia are looking for these days, or if you know of any resources Mongolians abroad can use to seek out opportunities back home. - Dave

Well, I think, first and foremost advantage of studying abroad is the language skill. The foreign language skill, no matter what language is it english, german, russian, korean, japanese or chinese, should be near to perfect. I guess, the other skills like team player, flexibility, hard worker are the general requirements for every company. And if u could complete your study in foreign country, then basically it means that person is mature enough to learn, adjust and work in any conditions the company offers.

Of course we noticed what Mongolian companies are looking for as employees.
Basically Mongolian companies are closely working with global companies. Therefore companies love to hire experienced people (professional with language skills)such as construction managers, risk managers, accountants. Obviously employees are able to communicate with foreign expats or able to work with foreign standards etc ACCA ...
So there are so many competitions within the companies. Because Mongolian companies are looking for experienced people rather than train them.
So fresh graduated Mongolians are hard to find the job, that is only reason they dont come back as soon as they graduated.
Personally, I would say that Mongolian companies need to train to get the best employees for future to secure the employees rather than stealing from another companies.
Also there are many ways to find job opportunity from abroad. Such as websites, agencies, friends, family members....
But you have to make good decisions. No rushing.
Because I made a mistake myself so I dont want people make mistake rushing to get job.
Consider what you really want to do in long term
Thanks Enkhbayar (ENK)

Dear Enkhee and Amaraa - Thanks for your comments. From my observations, there are not enough experienced people with foreign language skills to meet the needs of the private sector in Mongolia. Any company planning to stay long-term in Mongolia - whether Mongolian or international - is going to have to invest in smart new people - like you. What tips would you give to a Mongolian student abroad looking for opportunities back home? - Dave

Dear all,
My apologies for intruding your conversation, but as it's an open space, I've also decided to share my point of view. I believe that except the educational background that u acquire abroud, one of the most important things is to gain as much working experience as possible. In other words, preparing yourself as a qualified working force with vast international experience to work for the betterment of our country. Language skills are very important, as effective communication in English is the one which is required from employers. But one should always remember, especially the ones graduating abroad, that the proficiency in your native Mongolian language is what makes you more valuable as a potential employee if you are to pursue your future career in Mongolia. Notwithstanding the difficulties and challenges awaiting us in Mongolia, may our will and determination be strong, and the best of paths will lead us back home, to our homeland!

Anonymous,
Knowing the language is the most important part, but for someone like myself (born in UB & raised abroad) learning Mongolian was not a priority growing up. This does not mean I don't know the language, but rather my speaking, writing, and listening skills are no where near what they can/should be. Growing up, I've always appreciated the fact that my parents sent me back to UB when I had the time/money but as the years went on, I came to the realization that I am often ostracized and berated because of the fact I am not fluent even though I'm Mongolian (generally by the older generation). I've been able to learn other languages (French & German) and in a global world, my language skills would be highly beneficial to any organization/company in Mongolia. Yet I have had an internal debate with myself for the past two years on wether or not to use my BA & soon to be MS in Finance (specializing in urban infrastructure finance) to work in/for Mongolia. I love my country yet the questions I ask myself are: Can I work in a country where I'm not fluent in the language? In a professional environment, will my deficiency in the language allow me up-ward mobility if I choose to work in Mongolia? Socially, will I continue to be ostracized? I've chosen my career path specifically in development, BA was focused on agricultural economics, and I want nothing but to help those less fortunate but how can I when a language barrier as big as this one is present? It's not that I haven't tried but I have a notable accent & learning a fourth language has been difficult (I still am unable to read & write)

I believe that sooner or later, one absolutely must return to one's home country to contribute to it's development. The time-frame can vary from person to person and frankly, is a matter of personal discretion.
When one leaves for abroad for higher education, it might be to evolve, seek greener pastures in terms of career etc. And since you've already been able to make that transition / take that step and "evolve", you should come back to contribute to the development of your country, so that:
a) Similar facilities / opportunities are available to others and coming generations within your own country.
b) Through a developed framework, you can empower and better position others to also seek education / career opportunities abroad.
If one just goes, never to return or contribute, one may have evolved personally, but every next person will have to go through the same cycle and rut, thus essentially implying zero development or evolution, year-on-year and generation-on-generation.

Dear all, the topic raised by Erdene about whether he should return to Mongolia after 12 years in the U.S. to contribute to the country's development turned into such an interesting discussion, that we took it to the Bank's page on Facebook. Lots of people are commenting, and opinions are firmly divided.
Thanks Erdene and all for turning this thread into a fascinating topic, and if you want to jump into the discussion on FB, please do so through this link:
https://www.facebook.com/worldbank/posts/309100169180310
Dave will join the discussion there in a couple of days and address some more comments --here and there.
Cheers,
-- Claudia
Blog admin

Dave,
May I ask - what would you consider the major barriers to public sector investments in infrastructure? I mean clearly the problems resulting from high urbanization rates don't go unnoticed by the government, neither do the benefits – how come there is not more involvement?
Thank you!
Gina

Dear all - I really enjoyed reading your comments. As Claudia pointed out, this discussion is now on our Facebook page, where it is being actively discussed (60 comments so far). I will post comments there, so if you're interested, zip over to https://www.facebook.com/worldbank/posts/309100169180310. @Gina - Great question. While each country has its own issues that limit its investments in infrastructure, here are a few I've seen in places I've worked (mostly former Soviet Union, but also Aceh, Indonesia and Mongolia): (i) Limited public funds available; (ii) unfavorable business environment (e.g. tariffs mandated by government do not cover operating costs); (iii) PPP mechanism poorly understood; (iv) risks involved unclear, making decision making and consensus harder; (v)legislation doesn't always support infrastructure investment objectives. The question is enormously complicated and involves thorny social, political and legal questions in addition to business ones. It can take a long time to push through them. I believe getting the private sector involved helps a lot (think financing and expertise). But it's still complicated, which is why having a neutral, experienced PPP transaction advisor is such a huge plus. I'd be grateful to hear of other examples and illustrations of barriers to investment in infrastructure, especially from government, investors, or people with direct experience in the question.

It is very funny - as a researcher I was just searching some available information on air quality in UB and got into this blog by chance. And I found it valuable to share others experiences, and thoughts about returning home or stay in the developed world.
I am one who is not very supportive the system that divides money (less than $20 for each individual per month), that comes from the mining sectors, to the public. It is a big amount if it will be focused on certain things like reducing air pollutions, public health or education. The last aspect - the education, system is not adequate throughout country -no practice nor training. It is not only about higher education it is in every level and in different fields including vocational training, basic economic as well as political education to common public. Having an adequate political education will help people to understand their rights and responsibilities and release what we can expect from the politicians elected by us. This will not let politicians work for only their families.
My conclusion, briefly, is our government does not serve for public which must be its main aim and politicians are struggling to use a short term chance (4 years) to send their kids abroad. But it would be better if they struggle to give a chance to every kids to have a same start and same good school in their own country. This better educated society will create a better neighborhood and it may fit to their foreign educated kids.